My article reviews the judgment and discusses some of the key issues of equity law which arose in this important decision of the Full Court of the Federal Court of Australia. The title of the article is self-explanatory as to what those issues are, but it is worth noting that the article includes a consideration of –

Whether Lister v Stubbs is now dead in Australia, with regards to secret commissions and bribes received by those in a fiduciary position;

How a fiduciary (or involved third party)’s liability to account for wrongdoing is given effect by way of forms of equitable relief;

Whether the level of knowledge/notice required to trigger liability for knowing receipt, the first limb of Barnes v Addy is now the same in Australia as for knowing assistance;

Where there are multiple parties liable to account for the same loss/benefit, for example a wrongdoing fiduciary and a knowing assistant in the breach of duty, how is the liability “shared”? Are the fiduciary and third party jointly and severally liable? Or are they only severally liable?

In Australia, has the multi-jurisdictional doctrinal controversy surrounding the “true nature” of knowing recipient liability now quelled? Is it established that it is not a question of property law; that a claim to a subsisting equitable interest in misdirected trust or corporate funds or property in the hands of a third party, or their traceable product, is entirely separate from a claim against the third party for knowing receipt? (And is it still the case that where a director disposes of corporate property in breach of fiduciary duty, the company cannot bring a proprietary claim against the third party recipient until the transaction has been avoided/rescinded?) Has the unjust enrichment explanation for third party knowing recipient liability been confirmed to have been put to bed?

The Federal Court Portal shows that Mr Grimaldi has lodged an application for special leave to appeal to the High Court, so we may await further developments in this case with interest – at least with regards to the claims against Mr Grimaldi.

The article can be accessed here and under the new menu item I have added to my website “My Articles and Case Reviews”. For a review of the judgment and its treatment of de facto directors and officers, see my earlier post here.

*** Note that the article was written at the request of, and was subsequently published in, the UK journal: Trusts and Estates Law & Tax Journal, September 2012, volume 139.

**Update: The High Court denied Mr Grimaldi special leave to appeal this decision on 17 August 2012. The key grounds upon which special leave was refused are summarised here.